Question 2 Evo Berhad needs RM200,000 for 9 months additional short-term financing. The management has identified three (3) suitable financings for the project as follows: Alternative 1 Issue commercial paper at 9% annual interest rate with floatation cost of RM3,000 per paper. The face value of each paper is RM50,000. Alternative 2 A discounted loan at an interest rate of 7% and compensating balance of 5%. Alternative 3 A revolving credit agreement amounting RM350,000. The commitment fee is 3%. The annual interest rate on the loan is 6%. ! i. Calculate every alternative. ii. Which alternative is the best and justify your answer

Question 2 Evo Berhad needs RM200,000 for 9 months additional short-term financing. The management has identified three (3) suitable financings for the project as follows: Alternative 1 Issue commercial paper at 9% annual interest rate with floatation cost of RM3,000 per paper. The face value of each paper is RM50,000. Alternative 2 A discounted loan at an interest rate of 7% and compensating balance of 5%. Alternative 3 A revolving credit agreement amounting RM350,000. The commitment fee is 3%. The annual interest rate on the loan is 6%. ! i. Calculate every alternative. ii. Which alternative is the best and justify your answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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vi. Subject Finance
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H3. Show proper step by step calculation
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